Citywire Asia spoke to Tang Hsiao Ching, head of advisory and sales, managed investments, Asia at Bank of Singapore on trends in the industry.
Q. Tell us about your role.
A. I head up managed investment advisory and sales, which covers third-party funds, hedge funds and in-house discretionary portfolio management (DPM).
Today, it’s close to 20% of the bank’s penetration. Being headquartered in Asia facilitates streamlined decision making. As such, we are fast to market, which helps us stay ahead of the competition. For example, we work with various fund houses to partner with them to develop new business models in a retro-free world. This includes further developing our in-house DPM capabilities, to continue to offer differentiated products as well as to leverage technology for various advisory and discretionary offerings.
Q. Tell us about your fund selection process.
A. We have 150 funds on the recommended funds list, of which 10-15 funds are on the focus funds list. We work with external consultants on due diligence for both long-only funds and hedge funds. We also have an in-house due diligence team that works with external consultants to develop our internal due diligence process.
Funds are tabled at our Funds Investment Committee, which comprises analysts and advisers as well as the head of investment advisory sales. It is chaired by our chief investment officer. Funds are reviewed on a monthly basis.
Q. What are the red flags when it comes to removing funds?
A. We have a long-term approach; we are not short-term, momentum-driven investors. It’s a longer-term, buy-and-hold kind of strategy for funds. So it’s a weighted score, and we look at it on a semi-annual basis for the performance matrix.
The monthly review is not just to check performance, but to align with our house view. So if the house view is change then we also need to make adjustments to our fund selections. We may put funds on the watchlist when we see funds exhibiting style drift, manager departures or persistent underperformance versus peers.
Q. How many new partnerships have you signed with asset management firms in 2017?
A. We have 50-60 relationships in total. This year, we entered a number of large partnerships, which allowed us to provide timely solutions to our clients. These included a senior loan strategy and a fund of hedge funds strategy.
Q. Have you onboarded any smart beta funds?
A. Last year we launched a DPM offering subadvised by BlackRock. It is a portfolio of ETFs we manage in partnership with BlackRock based on a factor-investing approach. The mandate was launched over a year ago and has passed $200 million, as of September 2017.
Smart beta is a topic that is not well understood by HNWIs in Asia, and we have put a lot of effort into client education and training for our front-office colleagues. We believe clients should add exposure to factor investing to complement the traditional asset allocation approach.
Q. What is Bank of Singapore doing on the ESG front?
A. We have our eyes on it as a possible theme in the future. However, for the moment, we would rather focus on our expertise – emerging market debt and Asian equities.
Q. Has Bank of Singapore expanded its liquid alternatives range recently?
A. While we do have some liquid alternative offerings, it is not a key focus as we believe that in order to get the liquidity premium, you still have to go for offshore hedge funds that have less liquid redemption profiles. In general, smaller investors participate more in liquid alternatives due to the lower minimum subscription amounts. In a severe market sell-off, managers of funds with more liquid redemption profiles may be forced to sell at heavily discounted prices to meet redemptions, and smaller clients may suffer as a result.
Q. How does consolidation affect the mutual fund industry?
A. It is a boon for the funds industry because it’s all about scale. Look at BlackRock: it has close to $6 trillion in assets and a full suite of products. The larger fund houses have more resources to understand new regulations and have technology platforms we can also leverage from. That said, smaller fund houses that have a differentiated offering in terms of products and services will certainly still have a place in the industry.
This article was first published in the 2017 Asia Selector supplement to the Citywire Private Wealth magazine.